According to the Bangko Sentral ng Pilipinas, the survey, which used both modal and diffusion index methods to assess loan trends, reflects caution among banks amid concerns about borrower profiles and portfolio profitability.
Business loans
The modal approach showed that 80.4 percent of banks kept their lending standards for business loans steady in the third quarter, though this was a decline from 87 percent in the second quarter 2024.
However, the diffusion index method revealed a net tightening of standards, driven by banks’ reduced tolerance for risk and the deterioration in borrowers’ profiles.
For the last quarter of 2024, 90.2 percent of respondent banks planned to maintain their current loan standards; however, the diffusion index results point to further tightening due to stricter financial regulations and concerns over liquidity.
While 72.5 percent of banks reported steady demand for business loans during the third quarter, the diffusion index method indicated a slower net increase in demand compared to the previous quarter.
Rising loan demand was attributed to businesses’ needs for inventory and accounts receivable financing, alongside a more optimistic economic outlook.
Household loans
In household lending, 80 percent of banks kept credit standards unchanged in the third quarter, showing a slight drop from the previous quarter. The diffusion index method, however, reported a net tightening of standards, with banks citing weaker borrower profiles and reduced profitability.
For the fourth quarter of 2024, 82.9 percent of banks expect to maintain their lending standards, with the diffusion index results suggesting stable borrower profiles and risk tolerance.
Banks also reported rising household loan demand in the third quarter, supported by favorable financing terms and increased consumer spending.
While 60 percent of banks foresee steady household loan demand in the final quarter of the year, the diffusion index approach suggests a net increase in demand due to higher consumption levels and improved lending conditions.
The survey reflects banks’ cautious approach to lending, balancing demand with a tighter grip on credit risk amid evolving economic conditions.
